October 16, 2012

Economics and Reproduction

I recently read a paper about reproduction and economics. The hypothesis is that “the pill” has created a bifurcated mating market, and that dynamics of these markets can be explained by Game theory.

I read it, and thought, hmmm… It makes a good point — there really is a market coordination problem caused by “the pill”. More-over, I began to think about modern countries plunging birth rates. This problem is probably the most severe in Japan, where the country’s population is aging out at such a large rate, that there is a chance they wouldn’t survive, as a nation, even a minor war with China, Russia, India, or Korea. The question I began to think about was, “What incentive changed?” And I’ve come up with my hypothesis. Social Security/pensions. And it’s a “Prisoner’s Dilemma” coordination problem to blame again. The effects of this problem are things like, “Teenage pregnancy is bad” worldviews arising.

“Err, what? Isn’t Teenage pregnancy bad?” might be something you’ll ask when I mention this. My response to this is, “I’m not talking about teenage pregnancy, birth control, or any social policy/problem. I’m examining a force in a model. Teenage pregnancy was seen as normal once — it’s only in the last 100 years that it’s become seen as a problem. Why — what changed?”

And the change is social insurance/transfer payments( and I include traditional pensions in this definition of transfer payments. ) You see, before the advent of pension plans and social security, people wanted to plan for their old age. More-over, most industry was home-based, and labor forces couldn’t be hired in the quantity and pay conditions possible in a home-based, agrarian economy. So, the incentives of the time lined up around children. Children were both the “pension plan” of the people, and the, “Labor force” of the home-production system. The larger the family, the more the home economic unit could produce, and the larger number of carriers could mutually provide transfer payments once the parents reached an old age. Then came pension plans, social security, and “industrial” production processes.

What did this do? It incentivized not having children. People stopped making their own articles — clothes, toasters, etc.. and turning to the market to provide those objects — both cheaper and in better quality than can be made in the home. This meant that for quality of life to increase, disposable income became important, rather than the size of the local production force.( Aka the family as factory ). So, the incentive to have children to work around the house and farm went away — children’s major benefit became two-fold — retirement income, and their presence in our lives.

Well, social security meant that the incentive to have children as social insurance went away. Retirees came to rely on the government transfer payments. This meant that the only benefit of children was their utility benefit, rather than their producer surplus or mutual insurance benefit. Hence, children became a cost-benefit calculation, and are now treated as such.

How can I back this up? Well, Teenage pregnancy is seen as a problem — it wouldn’t be under the producer surplus model ( since each child would be seen as asset, sort of a “New hire.” ) People have started movements to ban children from things — Restaurants with separate rooms for children. PLanes with toddler sections. We now view children as the utility of the parents who had them, and say things like, “If they can’t afford kids, they shouldn’t have them!” Or, “Breeders, please stop taxing me. ” We’ve become a nation that hates children, because they don’t benefit us all, but rather, provide only utility benefit to their parents.

This has me wondering about the next 1000 years. I think we may be headed backwards, and hopefully so, to the home as primary production center. Social security is not sustainable when the base it draws from shrinks every year. I suspect that we may be just a few generations away from a return to, “16th century” values — as those seem to be the normal station of man. It’ll take a few hundred years. Maybe 1000. I won’t be around to see if this thought is right. I wonder if it is?